Are you interested in learning how to trade listed options in Singapore? Let’s teach you everything you need to know about trading options in Singapore, including the basics of options trading and how to get started. So whether you’re a beginner or an experienced trader, read on for all the information you need to start trading listed options today.
- 1 What are listed options, and why should you trade them?
- 2 How do you start trading listed options in Singapore?
- 3 What risks are involved in trading listed options?
- 4 How much money do I need to start trading options?
- 5 The benefits of trading listed options
- 6 How to manage your trades once they’re open
What are listed options, and why should you trade them?
Listed options are contracts that give the holder the right without the obligation to buy or sell an underlying asset at a specified price on or before a specific date. Options are traded on exchanges such as the Singapore Exchange (SGX).
Options are popular because they offer investors a way to speculate on the direction of an underlying asset’s price without purchasing the asset itself. And because options are derivative instruments, their prices are usually much lower than buying the underlying asset outright.
Furthermore, listed options provide traders with a high degree of flexibility, as they can be used for various strategies such as hedging, speculation, and income generation.
How do you start trading listed options in Singapore?
If you’re interested in trading listed options in Singapore, there are a few things you need to do first.
First, you’ll need to open a brokerage account with a broker that offers options trading. Not all brokers offer this service, so check before signing up. Once you’ve found a broker that offers options trading, you’ll need to fund your account and request access to trade options. This process varies depending on the broker but usually involves completing an online form and submitting it to the broker for approval.
Once your broker has approved your request to trade options, you’ll be able to start buying and selling options contracts on the SGX. When buying or selling options, you’ll need to specify the type of option you want to trade, the underlying asset, the strike price, the expiration date, and the number of contracts you want to trade.
If you’re unsure about any of these terms, check out our options glossary for definitions of all the key terms.
What risks are involved in trading listed options?
As with any investment, there are always risks involved in trading options.
The underlying asset’s price will move opposite what you expect, known as directional risk. Another risk is time decay, which refers to the loss in value of an option as it approaches its expiration date. An option’s value partly depends on the amount of time until expiration.
Finally, there is also the risk that the broker you’re using will become insolvent, and you’ll lose your money. That is why it’s crucial to choose a reputable broker and only trade with money you can afford to lose.
How much money do I need to start trading options?
The amount of money you need to start trading options will depend on the broker you’re using. Some brokers may require a minimum of $1,000, while others may have no minimum deposit. Be sure to check with a broker before funding your account.
The benefits of trading listed options
Listed options provide traders with a high degree of flexibility and can be used for various strategies. Options are also much cheaper than buying the underlying asset outright, making them an attractive option for investors who want to speculate on the direction of an asset’s price without committing a large amount of capital.
How to manage your trades once they’re open
Once you’ve bought or sold an options contract, you’ll need to manage your trade until it expires. It involves monitoring the underlying asset’s price and ensuring it doesn’t move too far in the wrong direction.
If the price does start to move against you, you may want to consider closing your trade early to minimise your losses. You can place a ‘stop-loss’ order with your broker, and this order will automatically close your trade at a specific price.
For example, let’s say you buy a call option on Singtel with a strike price of $3 and an expiration date of 1 January 2021. You might place a stop-loss order at $2.80, which means your trade will be automatically closed if the price of Singtel falls to $2.80 or below.